The international trading system is regulated by an increasing number of regional trade agreements (RTAs). The Addis Agenda highlights the importance of regional economic integration for the promotion of inclusive growth and sustainable development.
An ever-increasing number of regional trade agreements and preferential trade arrangements, including a notable increase in large plurilateral agreements under negotiation, is a prominent feature of international trade today. Following the notification of the RTA between Mongolia and Japan in June 2016, all WTO members now have an RTA in force and, currently, there are some 433 RTAs worldwide, according to the WTO RTA database.
Countries’ capacity to participate in international trade depends largely on their physical connectivity to world markets, such as the availability of regular shipping services for merchandise exports and imports. UNCTAD’s Liner Shipping Connectivity Index (LSCI) compares the level of maritime connectivity, in term of integration into global liner shipping networks, across countries. The maritime connectivity of SIDS and LDCs has been on the rise over the last 10 years but remains far below the world average. This imposes additional difficulties for SIDS and LDC exporters who are competing with exporters from other countries, who can get their products to their destination faster and cheaper.
The Asia-Pacific region has experienced a significant rise in regional integration from 2005 to 2015. Intraregional FDI has risen from 30 per cent to 52 per cent in this period. This has particularly been the case since the global financial crisis in 2008. ASEAN in particular has emerged as a significant beneficiary of intraregional FDI, due to the increase in production costs in China, and a concerted effort through the Initiative for ASEAN integration and other programmes to boost investment in Cambodia, Myanmar, Lao People’s Democratic Republic and Vietnam.
Newer investment programmes, most notably China’s One Belt-One Road are likely to increase intraregional FDI integration will further strengthen in coming years. However, once again it is important to note that the majority of intraregional greenfield FDI flows have ended up in South East Asia and East and North-East Asia, while other regions remain relatively unaffected. One Belt-One Road and other projects may provide an opportunity for countries in North and Central Asia and South and South-West Asia to access regional finance for investment.